Cryptocurrency market analysts see the risk of liquidation of Bitcoin rising as the first cryptocurrency struggles to reclaim $18,000 levels, but pressure from a sudden Fed move threatens riskier assets.
This comes as leveraged long margin traders try to consolidate above the $17k levels, but the volatility in the markets could bring bitcoin and the cryptocurrency market down quickly if headwinds from the Fed pick up.
Bitcoin trades during Sunday’s trading near levels of $ 17.1 thousand, with a marginal increase, while Bitcoin’s rise in a week does not exceed 1%, and its market value is $ 330 billion.
The US Federal Reserve will hold a meeting on the 13th and 14th of next December to discuss the fate of interest rates in light of the work to confront the high inflation rates in the United States of America.
Some do not now rule out a shift in the Fed’s policy as it becomes possible to increase by 0.75% next week instead of the 0.50% that the markets had been pinning hopes on – after the strong data on services, jobs and wages.
Market analysts say price had a mixed reaction on Dec. 9 after a November report on US producer prices showed a 7.4% increase versus 2021.
The data indicated that wholesale costs continued to rise and that inflation may persist for longer than investors previously thought.
Oil prices also remain a focus for investors, with WTI hitting a new yearly low of $71.10 on December 8.
The US Dollar Index (DXY), a measure of the dollar’s strength against a basket of the most important foreign currencies, maintained the level of 104.50, but the index traded at 104.10, its lowest level in 5 months on December 4.
This indicates low confidence in the US Federal Reserve’s ability to rein in inflation without causing a major recession.
Trader gutsareon noted that the volatile activity caused liquidation of long and short positions, but was followed by an initial unloading failure below $17,050. According to the analysis, stagnation in open interest on futures indicated a drop in bear confidence.
Regulatory uncertainty could have played a major role in limiting Bitcoin’s rally, as the US Securities and Exchange Commission (SEC) issued new guidance that could see publicly traded companies disclose their exposure to the crypto asset.
The SEC’s corporate finance division said the recent crisis in the crypto-asset industry has “caused widespread disruption” and that US companies may have disclosure obligations under federal securities laws to disclose whether such events could affect their business.
Margin markets provide insight into how professional traders position as they allow investors to borrow cryptocurrencies to leverage their positions.
Where an investor can increase exposure by borrowing stablecoins to buy bitcoins, on the other hand, bitcoin borrowers can only short the cryptocurrency because they are betting on its price going down.
And unlike futures contracts, the balance between long positions on margin and short positions is not always identical.
Glassnode data shows that the margin lending ratio of OKX traders increased from December 4 to December 9, indicating that professional traders increased their long leverage even after several failed attempts to break above the $17,300 resistance.
Currently at 35, the metric favors stablecoin borrowing by a wide margin and indicates that short positions are not confident of building bearish leverage positions, according to Glassnode data.